Why Nokia needs to reboot its Asha strategy

Nokia’s Lumia volumes might have increased by 27 percent sequentially to 5.6 million units in Q1 2013, what shocked the most is the steep decline in full-touch Asha shipments, which were almost halved sequentially to just 5 million units. Nokia has acknowledged that it witnessed “competitive industry dynamics and an estimated higher than normal seasonal decline in the market addressable by mobile phones.” During its earnings call, Nokia CEO Stephen Elop also mentioned that Nokia is planning to launch a refresh of its Asha series of phones. While it is good that Nokia seems to have expected this shift in consumer usage trends and has plans to tackle it, the biggest constraint for the handset vendor is time and it needs to deliver a brand new Asha experience right away.

I have been a big fan of Nokia’s full-touch Asha series from the beginning and felt that they provided a great balance of hardware features and experiences for first-time touchscreen users that cannot be provided by an Android smartphone at a sub-Rs 5,000 price point. That remains to still be the case but there’s something else responsible for Nokia’s Asha paranoia – local smartphone vendors.

Nokia had learnt it the hard way a few years ago when it missed out on the Dual-SIM trend by not responding to features provided by white box manufacturers, who cater to local players in most emerging markets. We can witness the same happening in the sub-Rs 5,000 smartphone space where local players have been overactive in the past couple of quarters. A quick check on Flipkart reveals there are 47 Android smartphones available at the time of writing this feature that are priced below Rs 5,000. Guess how many of global tier one brands are present in the list? None.

While Nokia’s Asha strategy, which created an entry-level smartphone competing product without having many crucial smartphone features paid off during its first six months, it seems that marketing full-touch Asha phones as smartphones might have backfired in the previous quarter. With Android smartphones now having encroached on Asha prices, Nokia can no longer play the price card that Asha provides smartphone-like features without having to spend on a smartphone. One can now buy a Android smartphone for less than what one would pay to buy an Asha full-touch phone. (For the record, Nokia classifies and markets its full-touch Asha phones as smartphones.)

Nokia needs to act before it gets too late and tier one vendors launch sub-Rs 5,000 Android smartphones. While Nokia is trying to bring down prices of its Lumia smartphones further, its Asha series will be crucial for it to be relevant in the mobile phone business that brings most volumes. The Finnish handset vendor shipped 55.8 million mobile phones (including full-touch Asha) and just 5.6 million Lumia smartphones last quarter – a period when its smartphone shipments increased by 27 percent and mobile phone shipments decreased by 30 percent!

Nokia already has a great suite of services including an app store, a music store, maps with navigation, among other things. What it really needs now is an exciting user interface and a platform that does justice to these services, something that S40 cannot provide. Think about features like some form of multi-tasking or even simple push notifications for apps. It could even implement Lumia’s design language, like it has already done with its 301 and 105 entry-level phones by giving them curved corners and Lumia’s color palette.

Elop mentioned during the earnings call that in the very near term we should expect to see a freshening in the Asha product line. “We’re roughly nine months into the Asha full-touch line relative to when we began shipping it. So it is reasonable to expect that it is due for freshening and we’re looking forward to that in the near-term,” he said.

While that’s encouraging, it remains to be seen how soon can Nokia deliver the new phones as it urgently needs them right away.